Sustainable Investing Doesn’t Hurt Your Returns. Here’s What Happened in the Coronavirus Slump.

Community Capital Management’s head of equities, Andrew Cohen, said the market slump allowed the firm to increase its exposure to investment-grade preferred shares and real-estate investment trusts.

Photograph by Johannes Eisele/AFP via Getty Images

Contrary to the perception that sustainable investing means sacrificing returns, large, passive, sustainable funds generally kept pace with the S&P 500 during the recent downturn.

Some did a little better. A quick look at the sector by Barron’s indicates the best-performing was the iShares MSCI USA ESG Select ETF (ticker: SUSA), which was down 9.6% from the Feb. 19 peak through Thursday. The two worst were the Vanguard FTSE Social Index Fund (VFTNX) and the Nuveen ESG Large Cap ETF (NULC), both down 11%. During the same period, the ishares Core S&P 500 ETF (IVV) was down 10.6%.

The data coincides with previous Morningstar research indicating that sustainable investing has no performance penalty.

“Based on how sustainable equity funds [performed from the Feb. 24 to Feb. 28 period], which resulted in the biggest downturn since 2008, concerns over performance of ESG funds in down markets appear to be unfounded,” Jon Hale, head of sustainability research for Morningstar, wrote recently. “Sustainable equity funds overall fared better than their conventional peers, and passive sustainable equity funds fared better than those following conventional market indexes.”

Hale looked beyond the passive funds to include actively managed ones as well. During that period, he noted that 58% of sustainable equity funds ranked in the top half of their respective categories.

The downturn has provided opportunities for managers to scoop up cheap investments. In a recent blog post, Community Capital Management’s head of equities, Andrew Cohen, noted that the decline “led us to increase our exposure to favorite assets” such as investment- grade preferred shares and real-estate investment trusts.

“In a world of one-percent rates, we expect that moving forward, those assets will do extremely well, particularly those relatively immune to economic activity,” Cohen wrote.

According to J.P. Morgan, the broadly defined ESG market has around $45 trillion in assets, representing 44% of the amount under management globally.

Write to Leslie P. Norton at

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